Why Investors Went Cold on SunPower Stock This Week

What happened

A steep price-target cut wounded SunPower (SPWR 1.38%) stock over the past few trading days. The company particularly took it on the chin the day the reduction was enacted. All in all, the company’s market value slumped by 9% over the course of the week, according to data compiled by S&P Global Market Intelligence.

So what

The analyst doing the cutting was Andrew Percoco of influential investment bank Morgan Stanley (MS 1.29%). Before market open Wednesday, Percoco sliced his SunPower price target to $8 per share, far down from his preceding level of $17. In doing so, he maintained his equalweight (read: hold) recommendation on the solar energy stock.

It wasn’t apparent why the analyst reduced his price target and why he did so to such a degree. However, it’s likely no coincidence that the move comes barely a month after SunPower released its latest set of quarterly results. The company missed notably on both the top and bottom lines.

Compounding that, it also made significant downward revisions to its guidance for the full-year customer count and, especially, its net income.

Now what

SunPower cited relatively weak anticipated demand in the Southeast and Southwest as a key reason for its guidance revision. Going forward, it plans to reduce both its workforce and its volume of investments. Neither development bodes particularly well for its immediate future — hence, the general bullishness clouding the company at the moment.

Investors shouldn’t completely dismiss SunPower as an investment. Solar penetration in this country is low. Meanwhile, such power systems are now more accessible and affordable than ever. The company certainly has a chance to right the ship. Perhaps when it starts to do so, analysts like Percoco will become SunPower bulls again. 

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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